Investment function of the economic entities – Risks and opportunities

Karadjova, Vera and Dicevska, Snezana (2014) Investment function of the economic entities – Risks and opportunities. Horisons International Scientific Journal Series A, Social and humanitarian Sciences.

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The latest economic crisis that has hit the world economy left more or less repercussions on almost all national economies. Economic policies are now faced with developing strategies to overcome consequences and to intensify economic development. The realization of the economic development has a multidimensional character and multiplicative effects. Investments are the key category in direction of overcoming the stagnation indicators in certain economy areas. They represent an economic category that converts free funds and excess cash (savings of households and firms) into tangible and intangible capital assets, that means investments are conversion of savings into equity funds. The need for investment requires differentiation of the real estate versus financial estate, first of all for understanding investments in financial instruments and effective diversification of the economic entities portfolio. Analysis of investments for its part necessarily requires reviewing of the ratio and correlation between the undertaken risk and the expected return on investments as one of the criteria for assessing the investments efficiency. Regardless of the form of long-term investments, there is a need for their planning and evaluation of the effects. Having in mind different risk types arising from the economic entities investment function, this paper elaborate two most common subtypes including: the risk of investing in securities, and the risk of investing in real investment projects (corporate risk). This type of risk is the possibility or probability for any economic entity to suffer adverse material - financial effects due to changes in the prices of securities in its portfolio or because of depreciation on real projects that are invested. Various economic entities have different exposure to this risk kind, primarily due to: the type of the economic entity and the scope of its involvement in operations with securities and investments in projects, the role and the position of the entity on the financial markets; the portfolio quality and differentiation (government and municipal securities, securities or projects in more or less risky companies, etc.). Usually risks that make direct connection with portfolio risk are credit risk, liquidity risk and interest rate risk. Key words: development, investment function, portfolio risk, securities, corporate risk, investment projects, financial markets

Item Type: Article
Subjects: Scientific Fields (Frascati) > Social Sciences > Economics and Business
Divisions: Faculty of Tourism and Hospitality
Depositing User: Mr Bojan Sekulovski
Date Deposited: 06 Nov 2017 12:27
Last Modified: 08 Nov 2017 12:38

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